Hi, I am looking for help from successful Traders on high probability trade setups that works for them, which I can look for and learn. I know trade setups are only 10% of the trading success, but without that getting the other 90% will not add any value. So to stay focused, discipline with good money management, I need setups that may work good in the long run. Appreciate any help/guidance from anyone, who can really help me. No bashing or selling of any kind please. Regards, Kuvala.
Classic setups can be found here, but you have to do the work to determine a) the context in which to trade them and b) how to manage your risk/reward. http://www.daytradingcoach.com/daytrading-technicalanalysis-course.htm This little pattern is one of the best, IMHO: http://www.dacharts.com/123.htm It's not always lower high (off the top) or higher low (off the bottom). Sometimes it's double top (or double bottom) and sometimes it's slightly higher high or slightly lower low (failed breakout of previous high/low). Bob Volman describes some great setups in his book "Forex Price Action Scalping". If you ever took calculus in school and got at least a "B" average, then you may find Al Brooks "Reading Price Charts Bar By Bar" the holy bible of price action setups.
There is no such thing as a high-probability setup - at least, that is not what matters in trading. What really matters, is a positive expectancy (the higher the better, obviously). What's the expectancy of a pre-defined setup: E = win%*win$ - loss%*loss$ In other terms, the expectancy is your expected average outcome per trade, when you take a large enough number of trades based on that setup. Things like the size of your initial stop, will impact both the win/loss%, as well as the win/loss$ ... so different trade management rules will lead to different expectancy for a given setup. Whatever setup of interest, go back months or even better years on your instrument(s) of choice, and analyze each setup instance and how the trade outcome will vary with all kind of trade parameters ... a lot of work, but this is how you'll discover how you could make money trading the markets. High-probability setup? Use a random entry, 100-tick stop, 1-tick target. I guarantee you, this has a high-probability of losing money, with a 95% win-rate.
Thanks dom993 for your reply and thoughts. I started this thread to know the setups to look for what you advised. Many experienced and successful are out there and I am trying to get the help form them to do these home works and select one which might suit well to my trading style and personality. To be frank all I want is just one or 2 two setups that I can work on with such high expectancy and be successful. The idea of this thread is from a great advise from Market Wizards, which says to find that one setup which works great for anyone's trading style and keep on doing the same. Also it advises that there are many setups out there already and I am looking for them.
Every trade is 50/50, can't say one is better than next one by it's own merit You need to learn the 99% first before learning setups 1%, unless you are scalping, entry is just a number and in longer term trading means little. The money is in the money management, it is rules of how to manage the trade AFTER you are in. A good way of testing whether you are ready is to take any chart and enter on every third bar and with the rules you have, how would you manage that one trade. There are two types of entries, momentum based which are breakouts and limits where you wait for price to come back to a number. Price action can use both such as getting in on trendline break, or fading the trendline. Can also watch trendline break as a filter and wait for price to retrace back to trendline, what was once resistance is now support. Lower highs to buy above or can use that as a filter and wait for price to come back half the distance to buy on limit. Breakout trades will always get you in and risk is the greatest, limit trades there is chance price doesn't retrace and you miss out but risk is lower and you will catch every loss. But it all becomes different if you look at a chart and know what needs to be done, and that will be able to change your losing percentages of losses to lower. Scalping for 1-8 ticks, you need absolute good entries but also perfect money management, unless you are leasing, or member, scalping too tough to make money if you are retail.
This is my top advice for everyone who asks me for help. Choose a single setup/tactic and master it to the point that you see it and you place the order without further thought or hesitation. When I was absolute beginner with just over 3 months of trading experience (and no specific plan other than trade entry triggers), I decided I wanted to be a day trader instead of a swing trader. I found a setup that made absolute sense to me (basically a 1-2-3 setup) and I paper traded it for a few weeks very successfully. Finally I took the plunge and started trading it live and I think I made around $17K in three weeks. Then I started messing with a simple plan and commenced to lose a lot of money. It took me a long time to get back to what in essence is that same simple plan.